Austrian school

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Austrian School

A school of economics that argues that human behavior is so complex it is extremely difficult or impossible to model. For that reason, it promotes deductive, as opposed to inductive, reasoning in its analysis. It is an extremely individualist school, advocating laissez faire policies and opposing all or nearly all government interventions in the economy. The Austrian School, and particularly its rejection of modeling, has faced criticism from both right- and left-leaning economists. It is so named because most of its founders were born in or around Austria. See also: Ludwig von Mises.

Austrian school

a group of late 19th-century economists at the University of Vienna who established and developed a particular line of theoretical reasoning. The tradition originated with Professor Carl Menger who argued against the classical theories of value, which emphasized PRODUCTION and SUPPLY. Instead, he initiated the ‘subjectivist revolution’, reasoning that the value of a good was not derived from its cost but from the pleasure, or UTILITY, that the CONSUMER can derive from it. This type of reasoning led to the MARGINAL UTILITY theory of value whereby successive increments of a commodity yield DIMINISHING MARGINAL UTILITY.

Friedrich von Wieser developed the tradition further, being credited with introducing the economic concept of OPPORTUNITY COST. Eugen von Böhm-Bawerk helped to develop the theory of INTEREST and CAPITAL, arguing that the price paid for the use of capital is dependent upon consumers’ demand for present CONSUMPTION relative to future consumption. Ludwig von Mises and Friedrich von Hayek subsequently continued the tradition established by Carl Menger et al. See also CLASSICAL ECONOMICS.

Disruptive innovation, to borrow a phrase from Harvard Business School professor Clayton Christensen, or creative destruction, in the more colorful formulation of Austrian economist Joseph Schumpeter, is the new reality for merchants of all kinds.

Murphy indicates (citing one of the main authorities in this field, Austrian economist Eugen von Bohm-Bawerk) that objective theory cannot explain the existence of interest, the main cause being its impossibility to explain price variations in time.

Contributed by economics and other researchers from the US and Europe, the seven essays in this volume are drawn from a conference held in October 2014 in Fairfax, Virginia, on the work of Austrian economist F.

Austrian economist Ludwig von Mises dealt at length with this issue in The Theory of Money and Credit (1912): "It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments.

The technique is called "information economics" and is inspired by the Austrian economist Friedrich Hayek's article "The Use of Knowledge in Society," published in The American Economic Review in 1945.

When John Maynard Keynes published "The General Theory of Employment, Interest and Money'' in the winter of 1935-36, its fundamental errors were so glaring to the Austrian economist Friedrich Hayek that Hayek figured the book would quickly slip into oblivion.

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